The Neptune Society is facing charges that it bilked consumers who bought “preneed” cremation packages, while in Florida a 90-year-old woman has learned that $13,000 she gave to a funeral home as part of a prepaid package has apparently been wiped out by the funeral home’s closing. The cases illustrate the risks involved in prepaid plans, which consumer advocates say too often fail to deliver on their promises.
In California, Attorney General Xavier Becerra charges in a lawsuit that Neptune engaged in unlawful business practices and systematic misconduct in marketing the preneed plans and alleges that the company broke California law by failing to hold in trust a substantial portion of the money consumers paid for the plans and that it misled customers concerning this illegal practice. Neptune is part of Service Corp. International, a nationwide company that owns funeral homes, cemeteries and crematoria throughout the United States.
“We charge Neptune Society with swindling customers who were simply trying to look out for their families and prepare for one of life’s most difficult moments,” said Becerra. in a news release. “Neptune misled these customers and failed to honor its legal obligation. We won’t fail to honor ours. We will hold Neptune accountable, because no one should have to worry about scams when preparing for one’s own death or that of a loved one.”
“While preneed agreements can benefit consumers, they bring inherent risks,” the lawsuit states. “At the time services are needed — sometimees years or decades after the date of purchase — the funeral service provider may not have sufficient funds to provide the services or may no longer be in business.”
To guard against that, California law requires companies selling preneed funeral plans to hold their customers’ payments in a fully refundable pre-need trust until the service is provided.
Becerra’s complaint alleges that, instead of honoring this requirement, Neptune illegally kept more than $100 million that should have been placed in trust. Neptune did this by steering customers into a plan that bundled cremation services and merchandise, and it then illegally pocketed the money it allocated to merchandise, the complaint charges, adding that Neptune deceived consumers regarding whether amounts paid for the plan would be held in trust, as required by California law.
Because the funds were allegedly misallocated, many of Neptune’s customers failed to receive the full refund to which they were entitled when cancelling their contracts. Thousands of the company’s other California prepaid customers could face the same consequence, Becerra said.
“When planning for something so personal and emotional as post-death arrangements, consumers should expect that their money is protected and will be there when it’s needed,” said Alameda County District Attorney Nancy O’Malley, who joined Becerra in the lawsuit.
Florida prepaid plan fizzles
In the Florida case, media reports said Victoria Hawkins, 90, has lost the $13,000 she put into a prepaid funeral plan back in 2006. She recently discovered the money is gone.
“I thought this was taken care of,” Hawkins said. “I want the money to do what I have to do for when God calls me home.”
The funeral home that took Hawkins’ money — Zion Hill Mortuary — recently closed abruptly, and Hawkins was told her money was lost in the closure. Former funeral director Dwayne E. Matt blamed “financial hardships” but said he is still trying to come up with the $13,000, according to a consumer investigation aired by WFLA-TV.
The situation is similar to the Neptune case in California. Both states have trust funds for preneed policies. When a policy is sold, a portion of the money is supposed to go into the fund for safekeeping in case the funeral home goes out of business or is otherwise unable to make good on its obligations.
A spokesman said the state is investigating whether Hawkins is eligible for help from the trust fund, even though the funds were allegedly diverted.
Matt insists he is trying to raise the money he needs to pay Hawkins back and said the funeral home building is up for sale.
“I’m going to pay her every penny,” Matt said, WFLA reported. “I am a man of my word.”
Scrutinize pre-need plans carefully
Consumer groups often warn that customers should scrutinize preneed plans carefully to be sure that their money will be there when they need it.
“Regulations vary widely from state to state, and you might not be protected if, for example, the funeral home you dealt with goes out of business or you move out of the state where you bought the plan. Find out about cancellation policies, and what regulations your state has in place to ensure the money you paid will be there for the funeral when the time comes,” the seniors organization cautions.